FCA Faces Calls for More Disclosure on Currency-Rigging

The headquarters of State Street Corp., left, HSBC Holdings Plc, second right, and Barclays Plc, right, stand amongst skyscrapers in the Canary Wharf business and financial district of London. Photographer: Chris Ratcliffe/Bloomberg

Dec. 2 (Bloomberg) -- The U.K.’s Investment Management
Association, whose members oversee about 4.5 trillion pounds
($7.4 trillion) of assets, is pressing regulators to provide
more information about the alleged manipulation of the foreign-exchange market, said two people with knowledge of the matter.

The trade group wrote to the Financial Conduct Authority in
recent weeks, asking how it should respond to clients’ inquiries
about whether currency markets are being rigged, said the
people, who asked not to be identified because the
correspondence is private. The FCA replied that it couldn’t
comment on a current investigation, one of the people said.

Fund managers are among the biggest clients of banks’
foreign-exchange desks and are at risk of being the biggest
losers from any rigging of the $5.3 trillion-a-day market. The
FCA opened a formal probe on Oct. 16, four months after
Bloomberg News reported that some traders had pooled information
about their positions with counterparts at other firms and tried
to manipulate the benchmark WM/Reuters rates.

“We deserve to know which mechanism is involved in any
wrongdoing,” said Colin McLean, founder and chief executive
officer of SVM Asset Management Ltd. in Edinburgh, which
oversees about $970 million and is a member of the IMA. “Even
very small errors or issues could involve large sums of money in
absolute terms and that is why it’s a concern.”

SVM hasn’t been in contact with the IMA regarding currency
rigging, nor has the firm been contacted by any regulator in
relation to the probe, McLean said. Annette Spencer, a
spokeswoman for the IMA, said the industry group had contacted
the FCA about the probe, but declined to comment further. David
Cross, a spokesman for the regulator, declined to comment.

WM/Reuters Rates

The WM/Reuters rates are used by asset managers and index
tracker funds to determine what they pay for currencies and to
compute the day-to-day value of their holdings, and by index
providers such as FTSE Group and MSCI Inc. that track stocks and
bonds in multiple countries.

The rates are published hourly for 160 currencies and half-hourly for the 21 most traded. They are the median of all trades
in a minute-long period starting 30 seconds before the beginning
of each half-hour. Rates for less-widely traded currencies are
based on quotes during a two-minute window.

The data are collected and distributed by World Markets
Co., a unit of Boston-based State Street Corp., and Thomson
Reuters Corp. Bloomberg LP, the parent company of Bloomberg
News, competes with Thomson Reuters in providing news and
information as well as currency-trading systems.

The FCA is working with regulators including the U.S.
Department of Justice and the Commodity Futures Trading
Commission to investigate the market. At least 12 traders have
been suspended and at least 11 banks, including New York-based
Goldman Sachs Group Inc. and London-based Barclays Plc, have
said they’ve been contacted by authorities.